OP-ED: Want to Stabilize the Economy? Stop Taxing It

March 22, 2020

Pierre Poilievre is the Conservative Shadow Minister of Finance

“First, do no harm,” said the ancient Greek doctor, Hippocrates, urging physicians never to administer a cure that is worse than the illness. Parliament should keep this Hippocratic Oath in mind when it returns Tuesday to vote on the government’s proposed treatments for Canada’s ill economy.

To call our economy ill would be an understatement. Markets have plunged 30%. A half-a-million Canadians applied for Employment Insurance last week, by far an all-time record. Canada went into this crisis particularly weak and vulnerable. In the last three months of 2019, our economy grew at an annual pace of just 0.3%, well below population growth, so per-capita GDP was already shrinking before the CONVID-19 outbreak even began. Half of households entered this crisis $200 from insolvency, according to respected accounting firm MNP. Canadian unemployment was higher than in the United Kingdom, the United States, Japan and Germany. The federal deficit was $27 billion and the federal debt-to-GDP ratio was growing before the pandemic started.

So what now?

To bring the economy back to life, the usual voices are demanding government borrow and spend to “stimulate”. But there is a simpler and more direct solution: stop taxing so much money out of the economy in the first place—that is to say, “stop doing harm.”

Consider this: the Government of Canada sucks about $340 billion out of the economy every year through over a half dozen kinds of taxes: income taxes, business taxes, payroll taxes, fuel taxes, tariffs, the GST and others.

The government has already announced massive tax deferrals and breaks. Filing and payment deadlines are delayed. Small businesses can now keep some of their employees’ income tax payroll deductions. Conservatives support these steps.

But to stem mass bankruptcies, we must leave more in the hands of the people who earned it.

Here is how:

First, Conservatives are proposing that the government refund small businesses all the GST that they have submitted to the government in the last six months and consider a holiday on further GST remittances for the next fiscal quarter. That would leave a small business with tens of thousands of extra dollars for rent, property taxes or loan payments to stay alive.

Second, Conservatives are asking the government to give small businesses a holiday on income tax remittances. So instead of taking money off their employees’ paycheques and giving it to the government, small businesses should be allowed to keep some of it to help them survive. In fairness, the government’s emergency fiscal response is doing that with a wage subsidy equal to 10% of an employee’s wages, capped at $1,375 per employee and $25,000 per employer. The government should let businesses keep more like $5000 per employee and $100,000 per

business. That would keep money in the hands of workers and businesses rather than government.

The government should also stop sucking money out of seniors’ savings, by waving 100% of the mandatory withdrawal from Registered Retirement Income Funds. The government has already reduced the amount seniors must withdraw by 25%. Not good enough. Wave it altogether, while seniors’ investments recover, so they don’t need to sell at massive losses during a stock market crash.

Next, the government should suspend the carbon tax altogether and cancel increases to Canada Pension Plan premiums. If Liberals will not cancel the carbon tax altogether, they should at least cancel the scheduled April 1st increase to it. These taxes kill jobs, by driving up payroll and energy costs for employers in the middle of a cash-crunch.

Most of all, the government must not use the COVID-19 crisis as an excuse to fulfill ideological fantasies with vast new governmental programs in the name of “stimulus”. That would only create a debt crisis in a few years.

The simplest and fastest way to ease the cash crunch of workers without wages and businesses without customers is to let them keep what they have already earned.

Taxes are burdensome at the best of times and deadly in a cash crisis. As Hippocrates